test 2


Mark the correct statements about the FE curve in the Mundell-Fleming model.

With imperfect, but not fully restricted capital mobility, the FE curve is upward sloping.
Which of the following variables is/are certainly not endogenous in the Mundell-Fleming model?

Government expenditures G.
Assume that the economy can be described by a standard Mundell-Fleming model with perfect capital mobility and a flexible nominal exchange rate. Suppose that the government and central bank would like to increase net exports. Which of the following policies would lead to an increase of net exports?

The government increases the lump sum tax.

The government decreases expenditures.


The central bank increases the money supply.

For questions 5-6, consider an economy described by a standard Mundell-Fleming model with perfect capital mobility. Now, income in the rest of the world LaTeX: Y^wYw decreases.

Equilibrium income decreases if the nominal exchange rate is fixed.

For questions 5-6, consider an economy described by a standard Mundell-Fleming model with perfect capital mobility. Now, income in the rest of the world LaTeX: Y^wYw decreases.

Furthermore, assume that the nominal exchange rate is flexible. Mark the correct statements.

The interest rate in equilibrium remains constant
Net exports in equilibrium remain constant
The domestic currency depreciates.
 
 

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